Property vs Shares Australia — 20-Year Comparison
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The property versus shares debate is Australia’s favourite dinner party argument. Everyone has a position. Most positions are based on personal experience or one-sided data. Here’s an attempt to look at the actual evidence over 20 years, with the same intellectual honesty you’d want applied to any investment decision.
The 20-Year Comparison: What the Data Shows
For the period 2004–2024, the data looks like this (approximate figures from CoreLogic, ASX, and Vanguard Australia):
| Asset Class | Annual Return (20yr avg) | $100k grows to |
|---|---|---|
| Australian Property (CoreLogic national median) | ~7.5% p.a. | ~$424,000 |
| ASX 200 (total return incl. dividends) | ~9.3% p.a. | ~$597,000 |
| Global Shares (MSCI World, AUD hedged) | ~10.1% p.a. | ~$674,000 |
At face value, shares win. But this comparison is deceptive in both directions — it overstates and understates property’s advantages simultaneously.
What the Simple Comparison Misses
Property’s Hidden Advantage: Leverage
When you buy property, you rarely put in 100% of the capital. A typical investor buys a $600,000 property with a $120,000 deposit (20%). If that property grows 7.5% in year one, it gains $45,000 — on a $120,000 investment. That’s a 37.5% return on equity (minus costs). Leverage massively amplifies property returns in rising markets.
By contrast, most retail investors don’t use leverage in shares (and shouldn’t — margin lending is risky for retail investors). A fair comparison uses levered property against unlevered shares, which shifts the numbers significantly in property’s favour during strong growth periods.
Property’s Hidden Disadvantage: Costs and Illiquidity
Property comes with substantial costs that eat into returns:
- Stamp duty: 3–5% of purchase price (varies by state)
- Conveyancing, building inspection, mortgage setup: ~$3,000–$5,000
- Ongoing costs: rates, insurance, maintenance, property management (~1–2% of value per year)
- Transaction costs on sale: agent’s commission (2–2.5%), legal fees
A 2022 paper in the Journal of Financial Economics estimated that total transaction and holding costs reduce gross property returns by 1.5–2.5% p.a. for most Australian investors. Shares cost 0.07–0.20% p.a. in ETF management fees, plus a flat brokerage commission per trade. That’s an enormous cost gap.
Shares’ Behavioural Disadvantage
Shares are liquid and visible. You can check them daily (you shouldn’t, but you can). During market crashes — 2008, March 2020 — retail investors panic-sold at the worst possible time. DALBAR’s 2023 quantitative analysis of investor behaviour found the average equity fund investor earned 6.81% less per year than the index over 20 years, purely due to behavioural mistakes: buying high, selling low.
Property’s illiquidity is actually a feature for behavioural purposes. You can’t panic-sell a house in 10 minutes. The transaction cost creates a forced holding discipline that most property investors benefit from.
Tax Differences
Property advantage: Primary residence CGT exemption. Your family home is fully exempt from capital gains tax when you sell. A $600,000 gain on your principal place of residence is tax-free. Nothing in the share market matches this.
Shares advantage: Franking credits. Australian dividends often come with franking credits (representing tax already paid at the corporate level). For many investors, particularly retirees, this creates a significant tax advantage that doesn’t exist in property.
Super advantage: Shares held inside superannuation during accumulation phase are taxed at 15% (not your marginal rate). Investment property can also be held in an SMSF, but the compliance requirements are complex and costly.
The Bottom Line
Over 20 years, Australian and global shares have outperformed property on a pure return basis — but the comparison is rarely apples-to-apples. Leverage amplifies property returns in rising markets; costs and taxes reduce them. Shares offer superior liquidity, lower costs, and diversification — but require behavioural discipline most investors struggle with.
The most honest answer: both. A diversified portfolio — shares (via ETFs) for liquidity and pure market returns, and a property (primary residence or investment) for leverage, CGT exemption, and behavioural forced holding — likely outperforms either asset class alone for most Australians over a 20-year period. The evidence doesn’t support going all-in on either.
This article is general information only and not financial advice. Past performance is not indicative of future results. Consider your own circumstances and consult a licensed financial adviser.
